Germany's economy grew at the slowest pace in five years last year, official data indicated Tuesday, as the ongoing U.S-China trade war, alongside disputes on tariffs between Washington and Brussels, hit Europe's largest economy.

Germany's Federal Statistics Office said 2018 GDP expanded by 1.5% last year, the slowest pace since 2013, but insisted the economy avoided recession by eking out a modest fourth quarter expansion after contracting through the three months ending in September. Germany's auto sector was the principal catalyst for the slowdown, as inventories from the country's automakers piled up over the second half of the year amid new emissions standards and a ban on diesel engine cars in several cities hammered sales.

"Increased uncertainty stemming from the trade conflict between the US and China as well as from Brexit has also weighed on the German economy," said ING's chief economist Carsten Brzeski. "Nevertheless, the problems in the automotive industry illustrate the wider problem of the German economy: the slowdown is a combination of one-off and structural factors."

"The future path of the economy clearly depends on which factors weigh more. If they're one-off factors, then a rebound of the entire economy looks plausible," he added. "Is they're structural , then the German economy should be prepared for a longer-lasting period of underperformance."

The euro slipped sharply to a session low of 1.1429 against the U.S. dollar following the data release, while benchmark 10-year German bund yields, a proxy for risk-free borrowing rates around the European single currency area, fell 3 basis points to 0.205%.